Exchange Rate Dynamics and the Skill Structure of Labor Demand in Tunisian Manufacturing Industries

Abstract

This paper provides empirical evidence on the effects of exchange rates movements on the demand for labor by skill in Tunisia. Using a panel of manufacturing industries from 1990 to 2010, findings suggest that only the demand for skilled labor positively responds to effective exchange rates depreciation. When the focus is shifted to bilateral exchange rates, it is shown that contrary to the USD/TND exchange rate, the EUR/TND exchange rate significantly affects the demand for the skilled labor force. The disaggregation of industries according to the technological intensity reveals that the effects of exchange rates on the demand for skilled labor are more important in medium-high technology industries than in low technology industries. On the contrary, the effects on the demand for unskilled labor remain not significant in the two categories of industries.